Financial Planning

What is a financial planning “road map”, and how does it benefit you? Just like a long road trip, a financial road map plots your life journey towards your financial goals. Not only does it help you determine where you are right now, but it reveals the different directions you could go and highlights the distance/work required to reach your destination. Here at WMM, in this article we offer an example of what this can look like. We hope this is helpful and invite you to get in touch to discuss your own road map via a free, no-commitment consultation.

Location

Where do your finances stand right now? Gaining a clear picture of your assets and liabilities is key to determining where your goals are realistic. For instance, perhaps in your case the former includes £50,000 cash savings, a £300,000 pension pot, a final salary pension (from a previous employer), a house which is nearly paid off and a large share in a business that you founded. 

However, your liabilities might include your outstanding mortgage, some personal debt (e.g. unpaid credit cards) and a loan used to invest in your business. 

It is also important to determine the “liquidity” of your assets; that is, how easily they can be converted to cash, for spending. Your business share may be an asset on paper, for instance, but does it produce a regular income? Could you sell it easily and generate a healthy profit if you wanted to, or would you have to lose a lot of value and income in a ‘fire sale’ if needed?

Destination

What would you like to achieve in the future? Perhaps you’d like to retire early, at 57. Or, maybe your dream is to travel the world with your spouse after the kids have left home. Whatever your goals, wealth will play a key role in making them a reality. Here, it is important to consider some vital questions to give the best chance of success. For example, how long are you likely to live? (Be optimistic!). What are your income and expenses likely to be in retirement? 

Perhaps your costs will go down since the mortgage will be paid off, the children will (hopefully) be living independently and you no longer commute to work. However, your lifestyle may rise in retirement as you take up new hobbies, make home improvements and travel. Living costs will also be higher due to inflation. Your pension and other savings will need to account for all these factors, and more.

Organisation

With your goals now established, it is time to construct a plan (the “road map”) to move you towards them. Suppose your goal is to retire at 52. Assuming your financial planner agrees this is possible, you can start crafting a strategy to achieve this. 

For instance, you will need to factor in that you cannot access your State Pension until much later (e.g. 67 or 68). Also, you cannot access pension funds until age 55 (rising to 57 in the future). So, initially you will need to draw from other income sources – such as your ISAs, regular savings and perhaps income from Buy to Let (BTL) property. This can also make sense from an inheritance tax (IHT) perspective, since ISAs and BTL properties are not automatically exempt from IHT like a pension pot is, or your family home (assuming its value falls under your IHTfree allowance). 

If you also intend on leaving an inheritance to your loved ones, then the plan will also need to ensure that you do not spend so much in retirement that nothing is left for them when you die. Here, a financial planner can help determine a “safe withdrawal rate” for your pension – so there are sufficient funds for a comfortable retirement, but also funds left to pass down later.

Invitation

Interested in finding out how we can optimise your financial plan and investment strategy? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM. 

You can call us on 01869 331469 

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).

A third of UK workers are considering a career change in 2022, with the sectors most likely to be affected including Legal, IT & Telecoms and Sales, Media & Marketing. Indeed, many analysts have called 2022 a “job seekers market”, with many sectors offering more vacancies than they seem able to fill. The age groups most affected appear to be 18-24 and those age 65+. Many of the former moved back in with parents since the 2020 pandemic, whilst many of the latter took early retirement (with too many unprepared, financially). 

The reasons cited by workers for leaving employment include a lack of pay rises or bonuses, limited flexibility (e.g. home working options) and feeling disrespected. In 2022, therefore, how can business owners ensure they keep their best staff? What kinds of qualities can employees look for in a good employer? Below, we suggest 3 benefits to keep in mind..

Put in a solid employee package

It might sound obvious, but offering a fair salary and decent employee benefits will be strong positive drivers in helping to retain staff. Unfortunately, many business owners do not keep an eye on market rates in their area/industry – leaving them vulnerable to poaching. Be careful not to assume that employees just care about pay, however. You can make a contract much more compelling with tax-efficient ideas such as the following:

• Matching employee pension contributions (rather than just offering 3%).
• Offering “death in service” benefits, as a type of life cover.
• Providing long-term sick pay.
• Making “salary sacrifice” schemes such as the ‘Cycle to Work scheme’ available.

Foster a healthy work environment

Few things are as likely to alienate employees as a toxic workplace. Perhaps discrimination is tolerated to some degree, making people feel unvalued and unwelcome. Maybe there is just a general atmosphere of unfriendliness, gossip or lack of trust between team members. Managers can also be overbearing, or disinterested.

Owners and directors play a key role in setting the tone and culture of the work environment. Part of this means prioritising staff training and team building exercises (e.g. fun days out). It also involves regular check-ins with employees to see how they are doing, encouraging team communication and opportunities to share fears/grievances. 

Finally, showing appreciation – with your words and even with gifts – can go a long way to help people feel appreciated and that their work is recognised.

Identify progression opportunities

Not everyone in a job wants to progress up the career ladder. Perhaps they are quite happy in their role, where they are. However, many people do want the opportunity to earn better pay and take on new, interesting responsibilities. If their job feels like a “dead end”, however, then they may start to look outside your organisation to meet these needs.

Small business owners may find this a particular challenge since, by nature, there are fewer job opportunities in the company compared to a larger one. However, if the business is growing and adding more people to the team, then you can paint a vision of where the company could be in, say, 5 years’ time – and the role that your employee could progress into, if they work hard.

Vision and momentum are really important. If people in your team feel like the organisation is not really “going anywhere”, then they might see limited future opportunities to develop their skills and earning potential. You can help address this by providing regular “strategy” meetings throughout the year about where you want the business to go. From there, make sure you follow through and deliver. If not, your team will likely start to see your “strategies” as not grounded in reality or real promises.

Invitation

Interested in finding out how we can optimise your financial plan and investment strategy? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM. 

You can call us on 01869 331469 

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).

In 2022, many households face greater financial pressure as living costs rise. However, less well known is a set of “stealth taxes” that could erode your wealth without careful planning. Below, our team at WMM shares six of these to be aware of in the coming months – together with ideas to address them with your financial planner. 

Five-year income tax freeze

Chancellor Rishi Sunak announced in the 2021 Spring Budget that income tax (together with others like capital gains tax and inheritance tax) will be frozen for four years from 2022/23 to 2025/26. Some projections suggest that this could, eventually, push 1.2m people into the 40% higher rate threshold as average UK wages steadily rise.

A range of options can be used to mitigate the impact on your finances. One idea might be to increase your pension contributions, as these receive tax relief at your highest income tax rate.

State Pension rise cap

In normal times (under the “triple lock” system), the State Pension rises each financial year in line with inflation, 2.5% or in line with the National Average Earnings Index (NAEI) – whichever is highest. However, after an 8.8% increase in earnings last year, this formula was suspended. Instead, the State Pension is set to rise by 3.1% in April. This is below the current 5.5% rate recorded by the Bank of England (BoE), and lower than the 7.25% rate projected in the spring.

Here, you may need to discuss your strategy with a financial planner. It might be that you need to lean more heavily on other income sources to fund your retirement in the short term (e.g. ISA savings). Alternatively, you may need to revisit your budget.

Child benefit loss

For parents with two children child benefit can be worth up to £2,000 per year. Once you or your partner starts earning over £50,000 per year, however, you may need to start paying some of this back (via a levy called the “High Income Child Benefit Tax Charge”).

This threshold has been frozen since 2013 and is set to continue as frozen in April 2022. This means about 1.6m families could lose their child benefit – including 120,000 families on the basic rate – as higher inflation and wage growth occurs across the country.

Again, this might mean revisiting your financial plan as a family, to prepare. For some, it might form another reason for a child-caring partner to return to full-time work (now that the children are older). Others may need to re-examine their budget.

Whatever you do, be careful not to simply avoid claiming child benefit (to avoid the hassle of repaying). Claiming can help you build up your State Pension via National Insurance credits.

Pensions lifetime allowance freeze

The lifetime allowance (LTA) is the maximum you can hold in your pension(s) before facing extra tax charges, and this has been frozen at £1,073,100 until April 2026. The annual allowance – which caps yearly pension contributions at £40,000 – will also remain frozen.

With inflation going up, many expected the LTA to rise to account for the rising cost of living. Yet the Chancellor has said he is pursuing this route as an alternative to raising income tax, VAT or National Insurance. This means that retirement savers need to be extra careful, planning so that they do not inadvertently breach the threshold.

Doctors and high-earning public sector workers, for instance, may be particularly at risk. Here, you can explore options such as “de-risking” your retirement portfolio strategy, if you still have some years ahead of you until retirement and you are nearing the LTA. Another idea is to make use of other tax-efficient investment vehicles, such as a Stocks & Shares ISA or a VCT.

Invitation

Interested in finding out how we can optimise your financial plan and investment strategy? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM. 

You can call us on 01869 331469 

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).